Future check financing method

ABSTRACT

A Future Check Financing Method is disclosed. The method enables purchasers and others to present future-dated checks (or other payment vehicles) at the point of sale for purchases. The potential recipient of the future-dated payment vehicles and/or a check guarantee entity is able to make a lending decision based solely on the presenter&#39;s check writing history. The recipient of future-dated checks under the method will receive full payment (typically minus service charges) nearly immediately after completing the transaction with the presenter, rather than when all future-dated payment vehicles become payable. The check writing history may include negative check writing history for the presenter, but also may include positive check writing history for the presenter.

This application is a continuation in part of U.S. patent applicationSer. No. 10/894,806, filed on Jul. 19, 2004 entitled “FUTURE CHECKFINANCING METHOD” which is hereby incorporated herein by reference.

BACKGROUND OF THE INVENTION

1. Field of the Invention

This invention relates generally to Point of Sale financing methods and,more specifically, to a Future Check Financing Method.

2. Description of the Related Art

Payment systems are undergoing rapid change. Historically, there weretwo major ways of paying for goods or services—either by cash or check(“payment by cash”), or by loan (“payment by credit”). Technology andthe ready availability of credit to individuals has spawned a nearlylimitless variety of payment methods that are now available. The currentinvention relates to one particular payment method based upon “futurecheck” payment. Before discussing the conventional future check paymentmethod, we will first begin by discussing the other more traditionalpayment methods conventionally available.

SUMMARY OF THE INVENTION

In light of the aforementioned problems associated with the priormethods and systems, it is an object of the present invention to providea Future Check Financing Method. The method should enable purchasers andothers to present future-dated checks (or other payment vehicles) at thepoint of sale for purchases. It is a further object that the potentialrecipient of the future-dated payment vehicles and/or a check guaranteeentity be able to make a lending decision based solely on thepresenter's check writing history. It is yet another object that therecipient of future-dated checks under the method receive full payment(typically minus service charges) nearly immediately after completingthe transaction with the presenter, rather than when all future-datedpayment vehicles become payable. It is another object that thecheck-writing history may include negative check writing history for thepresenter, but also positive check writing history.

BRIEF DESCRIPTION OF THE DRAWINGS

The objects and features of the present invention, which are believed tobe novel, are set forth with particularity in the appended claims. Thepresent invention, both as to its organization and manner of operation,together with further objects and advantages, may best be understood byreference to the following description, taken in connection with theaccompanying drawings as follows.

FIG. 1 is a flowchart depicting a conventional payment-by-check method.

FIG. 2 is a flowchart of an alternate conventional payment-by-checkmethod.

FIG. 3 is a flowchart depicting a conventional payment-by-credit method.

FIG. 4 is a flowchart depicting a conventional payment-by-future checkmethod.

FIG. 5 is a flowchart depicting the current-payment-by-future checkmethod of the present invention.

FIG. 6 is a diagram of the funding flow and timing for the method ofFIG. 5.

FIG. 7 is a flowchart depicting the average monthly balancecurrent-payment-by-future check method of an embodiment of theinvention.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS

The following description is provided to enable any person skilled inthe art to make and use the invention and sets forth the best modescontemplated by the inventor of carrying out his invention. Variousmodifications, however, will remain readily apparent to those skilled inthe art, since the generic principles of the present invention have beendefined herein specifically to provide a Future Check Financing Method.

The present invention can best be understood by initial consideration ofthe prior methods, commencing with FIG. 1. FIG. 1 is a flowchartdepicting a conventional payment-by-check method. The conventionalpayment-by-check method 10 commences with a presenter presenting a check100 presumably to a seller or merchant selling a good or service. Thepotential recipient historically will verify the check writing historyof the presenter 102 (many times using the assistance of a checkguarantee company). The check writing history is available through avariety of different sources or databases that can be purchased bymerchants. Well-known databases include the SCAN Database and/or the NCNDatabase. There are also other private and internal databases. Thesedatabases all provide information of any negative activity related to anindividual's check writing. For example, if an individual has written anumber of checks that either bounced or if there were other problemswith payment, it would be indicated in one of these negative checkhistory databases.

Returning to the method 10, the potential recipient determines under itsown guidelines (or a check guarantee company's guidelines, ifappropriate) whether or not the check writing history is favorable 104.Presumably if the potential recipient determines that the report isunfavorable (or if the check guarantee company declines to guarantee thecheck), the recipient will refuse to accept the check 106. If, however,the history is favorable, the recipient will then deposit the check intheir bank account 110 after which the presenter's financial institutionwill honor the check 112 assuming that there are sufficient funds andthere has not been a stop payment on the check (and/or the checkingaccount is not closed. The report is typically received immediately atthe point of sale, but may also be retrieved by phone, facsimile, oreven world wide web; it usually consists of a “yes”, a “no”, or a “callcenter code.”

Since the check writing history does not report on the status of theindividual's bank account, there has been no verification of thisinformation so there is some risk to the recipient that the presentedcheck will not clear. To prevent a total loss, it is not uncommon for arecipient to subscribe with a check guarantee entity 114. The checkguarantee entity 114 will, for a percentage of the check amount,guarantee payment to the recipient. If at some future time the presenter(or the presenter's financial institution) does not honor the check, thecheck guarantee entity will be left to recover the funds from thepresenter. If we now turn to FIG. 2, we can examine another currentpayment-by-check method.

FIG. 2 is a flowchart of an alternate conventional payment-by-checkmethod. In the alternate conventional check payment method 12, thepresenter presents the check and the potential recipient and/or checkguarantee company verifies the presenter's bank account 116. Verifyingthe bank account in this case means using a banking network such asBalance Verification and/or manually calling the presenter's bank toverify that funds are available. The potential recipient and/or checkguarantee entity will then make a determination of whether the balanceis sufficient 118 for him or her to accept the check. Presumably if thebank reports adequate balance, the recipient and/or check guaranteeentity would be expected to accept the check (when a specific amountcannot be verified). If, however, there is an insufficient balance, itwould be expected that the recipient and/or check guarantee entity wouldrefuse the check 106.

If the recipient and/or check guarantee entity accepts the check 108,the check is deposited into the recipient and/or check guaranteeentity's account 110 and then the presenter's financial institutionhonors the check if there are sufficient funds and there's not been astop payment or closed account when the time comes for the check toclear. Because there is a time delay between the bank accountverification 116 and the occasion for the presenter's financialinstitution to honor the check 112, there is some risk that paymentwon't occur. Again, a check guarantee entity may be engaged 114 tounderwrite the payment of the check.

In more recent systems, a merchant may be able, through the bank accountverification, to actually place the funds on hold 120, after which, whenthe check is deposited, the presenter's financial institution will honorthe check as long as there's not been a stop payment 122. It is believedthere are also occasions where the funds will actually automaticallytransfer to the recipient and/or check guarantee entity's bank 124 uponverification of the presenter's bank account 116. The specifics of thesetransactions are not known, but it is believed that they do exist.Again, in this prior method 12, the check guarantee entity may beengaged to underwrite checks 114. As discussed above, the otherconventional approach to purchasing goods or services is by credit. Aconventional method for credit purchases is depicted in FIG. 3.

FIG. 3 is a flowchart depicting a conventional payment-by-credit method.Conventional credit purchase method 14 commences with the presenterpresenting or offering a credit vehicle 126 to the seller. This could bein the form of a loan, of a credit card or even a debit card. Thepotential recipient verifies the presenter's credit 128. This creditverification is done through a credit history data repository.Well-known trademarked services include Experian, Equifax and Transunionwhich are well-known credit history data repositories. The recipientthen determines, based on its standards, whether or not the creditreport is favorable 130. If the credit report is unfavorable, presumablythe recipient will refuse to accept the credit vehicle 132. If thecredit report is favorable, however, the recipient will be expected toaccept the credit vehicle 134. The funds are then transferred to therecipient 136, typically reduced by a “discount rate,” to allow therecipient to receive cash today while the creditor/finance company willreceive payment over time into the future. So the funds are transferredto the recipient 136 and the presenter is then left with a debt to thecreditor 138. A more creative approach to future payment for currentgoods or services is depicted below in FIG. 4.

FIG. 4 is a flowchart depicting a conventional payment-by-future checkmethod. FIG. 4 depicts a conventional future check payment method 16.This method is typically used when a potential buyer has anunsatisfactory and/or insufficient credit history to allow them toobtain a credit vehicle. As a result, they would not qualify if therecipient were to verify their credit through conventional credithistory data repositories. What happens here then is that the presenterpresents one or more future-dated checks 140 (in accordance with anagreement between the parties). Commonly, the presenter will presentthree checks each for an amount that equals one-third of the purchaseprice plus an agreed-upon service fee. One of the checks would be datedfor a current date and, therefore, could be deposited immediately, whilethe other two checks are dated for staggered future dates. The potentialrecipient will then verify the check writing history and/or the bankaccount 141 to determine whether or not there is a favorable report 104or 118. Of course, and with the other previously-mentioned methods, thepresenter will also provide proof of their identification (e.g. adriver's license). If either verification does not meet the recipient'sstandards, then the recipient will refuse the checks 142. If, however,the recipient determines that the reports are favorable, the recipientwill accept the checks 146.

Typically, the recipient will then deposit check number one into theiraccount 148 (on the agreed-upon date) and that check will be honored ornot 150; for example, if there are insufficient funds when the time forfunds transfer arrives. Again, this can be underwritten by a checkguarantee entity 152. When the date arrives for which check number twois written out, after a time delay, check number two will be depositedin recipient's account 154 and then that check will be honored or not156. Similarly, at some future future-dated date, check number threewill be deposited in the recipient's account 158 and it will be honoredor not 160. The check guarantee entity may underwrite this future checkpayment method individually 152, i.e. if at the time of each check'spresentment to the financial institution for funds transfer it isdetermined that there are insufficient funds, the recipient will stillreceive its funding and will be left to the check guarantee entity topursue replacement funding from the presenter.

The problem with these existing payment-by-cash and payment-by-creditmethods is that there is still substantial risk for the merchant and itdoes not enable the merchant to receive their funds immediately for thegoods or services that he is providing to the presenter today. It, ineffect, makes the recipient act as a finance company because they willbe receiving their payment over time. What is needed then is a methodthat enables a merchant to be paid today by a presenter that hasinsufficient traditional credit to qualify for verification of credithistory. Having now reviewed the prior methods and systems, we'll gointo the detailed description of the invention. The present inventioncan best be understood by initial consideration of FIG. 5.

FIG. 5 is a flowchart depicting the current-payment-by-future checkmethod of the present invention. It is intended to replace the priormethod described above in connection with FIG. 3. Anywhere herein thatthe term “check” is used, it is understood that the inventor isreferring to the variety of payment instruments, including ACH, creditcards and debit card; in each such case, the same method will befollowed, but instead of a group of future checks being exchanged forgoods or services, it is a group of other payment vouchers.

The current payment for future check method 18 of the present inventioncommences, like the conventional future check payment method, with thepresenter presenting one or more future-dated checks 140. Next, thepotential recipient simply verifies the presenter's check writinghistory 102. This is identical to the situation where the recipient willbe cashing a current check. The recipient then determines whether or notthe check writing history report is favorable 104. Again, just like theprior check cashing method. If the report is unfavorable, the recipientwill refuse the checks 142. If, however, the report is favorable, therecipient will accept the checks 146.

It is here that the critical differences between this new method and theprior methods arise. The recipient will then sell the checks to a checkguarantee entity 162. These guarantee entities could be the conventionalcheck guarantee entities available today or they might be of thefinancial institutions themselves (or a combination). Upon consummationof the sale to the guarantee entity, the recipient receives full paymentfrom the check guarantee entity 164 (minus a service charge). When wesay full payment here, we, of course, mean payment for the amount of thechecks minus the check guarantee entity's service charge. The checkguarantee entity then deposits check number one 166 because it is datedfor a current date and that check is honored or not 168. Since the checkguarantee entity actually is the owner of the checks, there is noexternal agreement or underwriting necessary. The check guarantee entitywill pursue the presenter if the check does not clear. When the date ofthe second check arrives, the check guarantee entity deposits checknumber two 170. That check then is honored or not 172 and the checkguarantee entity receives payment. At the date of the third check, thecheck guarantee entity will deposit check number three 174 and thatcheck will be honored or not 176 and the check guarantee entity willreceive payment.

This method is powerful because it permits the merchant to be paidimmediately rather than having to act like a loan company. It permitsthe presenter to buy things on time even though they have aninsufficient or unsatisfactory credit history, and it enables the checkguarantee entity to determine early on what their underwriting standardsare so that presumably they would obtain better clients. It wouldencourage more commerce because it creates greater opportunity for theutilization of funds. Furthermore, it expands the utility of the checkwriting history data repositories—these have historically only been usedwhen deciding whether to accept a single check as payment, but neverhave they been used for point-of-sale underwriting a group of futurechecks, nor have they been used to support or aid in making lendingdecisions, which the method of the present invention completes.

In another embodiment, the check writing history data repository mayalso include positive information about the presenter, i.e. where apresenter has an unblemished history, with perhaps weighting for highcash value of checks written. Furthermore in addition to, or incombination with the information obtained through these databases, ageof the check writers account (via the check number) for example check101 vs. check 12536, the amount the check is written for, the age of thecheck writer (via a form of ID), and/or the location the transaction istaking place (the ZIP code) are examined in making a determination bythe recipient and/or check guarantee entity as whether to accept thecheck(s) or not.

An example of an expansion on this concept is one in which the presenterarrives at the merchant's site and has failed to bring along theircheckbook. In such a case, it is believed that the merchant could have aseries of blank checks (i.e., without bank account numbers or routingnumbers on them), similar to those given to individuals when they open anew account. Rather than waiting for the presenter to go home andretrieve their checkbook, it would be a simple matter for the presenterto contact their bank, typically by telephone, to obtain their bankaccount and routing information once their identity is verified. Theuser could then fill out these checks with the appropriate information,future-date the appropriate checks and then the method would proceedjust as described in FIG. 5. In yet another alternate situation, therecipient could create a “schedule of checks” which is a single sheet ofpaper showing all of the transactions both current and future that havethe same effect as individual checks, but are documented in a bindingway on a single sheet of paper. This would make it easier and quicker togenerate the checks for the presenter's signature. If we now turn toFIG. 6, we can see how the transactions relate to one another.

FIG. 6 is a diagram of the funding flow and timing for the method ofFIG. 5. As shown here, the buyer first writes the checks which will befor the total of the purchase price plus the check guarantee entityservice charge plus an expected financial institution service charge200. The seller having received the checks verifies the check writinghistory and accepts the checks 202. The seller then immediately sellsthe checks 204 to the check guarantee entity, which has previouslyestablished the guidelines for entering into agreement with seller 206.The guarantee entity will then pay the seller 208 for the purchase priceminus the guarantee entity service charge 210. The guarantee entity willthen present check number one to the financial institution 212 afterwhich the financial institution for check number one 214 in an amountthat is the check number one amount minus the financial institution'sservice charge 216. On the date of the second check (future-dated), thecheck guarantee entity will present check number two 218 to thefinancial institution. The financial institution will then pay checknumber two 220 in the amount that is check number two minus theirservice charge 222. This will repeat until all future-dated checks havebeen redeemed by the check guarantee entity to the financialinstitution.

As can be seen here, the buyer has been granted credit because his orher account is not being debited until his or her financial institutionpays the checks at some point in the future. The seller is happy becauseit has received its payment nearly immediately after the sale of itsgoods and the check guarantee entity is happy because it has generated afee earlier and for a higher percentage of check transactions. Asdiscussed above, where the term “cash instrument” is used in the Claims,it is intended to refer to the use of checks, ACH vouchers, credit cardvouchers and the like, in the manner described herein.

Another embodiment of the future check method of the present inventioncomprises a presenter presenting one or more post-dated checks 140. Thepotential recipient verifies the average monthly balance of thepresenter's bank account 180 and optionally the amount of time that thebank account has been open. This may involve accessing a bank accountwith a PIN number with the interaction of the presenter or via a credit,debit or merchant supplied card that provides access to a bank accountor centralized database in order to obtain this information. There is noknown centralized database that currently exists which comprises thisinformation, however embodiments of the invention are capable ofutilizing a centralized database comprising average monthly balance andaccount lifetime if such a database were to exist. The banks in thisscenario could also earn a transaction fee whenever a merchant accessedthis information. A smart card could also be utilized in this scenariowith the average monthly balance and optionally the age of the accountstored locally on the card. Alternatively, the presenter may input abank user name and password into a web page in a browser to access afinancial institution hosted web site comprising average balance andother historical information. The presenter may alternatively giveverbal authorization to a bank employee with the recipient on the lineto obtain the average monthly balance and optionally the length of timethat the bank account has been open. The potential recipient may thencalculate the number of checks to accept for future payment or use acheck guarantee entity's guidelines in determining the number of checksto accept 182. For example if an item to be purchased has a price of$1000 and the average bank account balance is $200, then at least fivechecks may be required by the recipient to give a level of confidencethat the purchase is worth consideration. Optionally, if a bank accounthas not been open for a minimal amount of time or if the item purchaseprice divided by the average monthly balance yields too large of anumber of checks required, then the recipient can refuse payment bychecks 142. Given that the recipient accepts the checks 146, then therecipient sells or assigns all checks to a check guarantee entity 162.After selling the checks (or other cash instruments) to the checkguarantee entity (or any third party that may enter the market for thesetypes of services such as for example an insurance company), therecipient receives full payment from the check guarantee minus anyservice charge possibly include financial institution service chargesper check payment. The check guarantee entity then deposits check numberone 166 since it is dated currently and it is either honored or not 168.The process continues at the predetermined interval, generally a monthbut which can be any pre-agreed time interval. The number of checks todeposit depends on the calculation at 182 and any formula can be used inorder to provide the required confidence level in the transaction. Thisembodiment differs from FIG. 6 in that the steps 180 and 182 replacestep 202 with the number of checks to deposit determined by step 182.The method of FIG. 7 may occur if a credit card presented does not havesufficient funds if any of the other check payment methods fails forexample. Any method of displaying and calculating the variable amount ofchecks required to fulfill payment is within the spirit of theinvention. This may for example include payment date screens that aredisplayed in a graphical user interface based on the amount of checksrequired based on the purchase price in relation to the average monthlybalance.

Those skilled in the art will appreciate that various adaptations andmodifications of the just-described preferred embodiment can beconfigured without departing from the scope and spirit of the invention.Therefore, it is to be understood that, within the scope of the appendedclaims, the invention may be practiced other than as specificallydescribed herein.

1. A future financing method comprising: receiving two or more payment vouchers at a point of sale by a merchant for goods or services by a presenter of said two or more payment vouchers before delivering said goods or services wherein said two or more payment vouchers comprise a first payment voucher to be processed on a first date and a second payment voucher to be processed on a second date, wherein said second date is after said first date and wherein said presenter has traditional credit history that is insufficient to qualify for an equivalent cash instrument or credit vehicle wherein said traditional credit history comprises a credit report and wherein said two or more payment vouchers are not backed by sufficient funds to purchase said goods or said services outright at time of said accepting said two or more payment vouchers; accessing a payment voucher history database coupled with a computer; accessing from said computer a positive payment voucher writing history from said payment voucher history database wherein said positive payment voucher writing history comprises one or more positive characteristics associated with said presenter chosen from a high cash value of payment vouchers written by said presenter, an age of an account associated with said presenter, an age said presenter, a ZIP code of a location where said receiving said two or more payment vouchers at said point of sale from said presenter occurs; verifying the positive payment voucher writing history associated with said presenter; accepting said two or more payment vouchers from said presenter on said verifying said positive payment voucher history without relying on said credit report; selling said two or more payment vouchers by said merchant to a check guarantee entity; and, receiving full payment minus a service charge before said second date for said goods or services from said check guarantee entity by said merchant upon said selling of said two or more payment vouchers to said check guarantee entity wherein said check guarantee entity receives payment from said two or more payment vouchers at said first date and said second date that occurs after said first date.
 2. The future financing method of claim 1 further comprising: obtaining an average monthly balance of an account associated with said two or more payment vouchers; and, calculating a number of payment vouchers to accept for future payment based on a purchase price and said average monthly balance of said bank account.
 3. The future financing method of claim 1 further comprising: redeeming a first check selected from said two or more payment vouchers by said check guarantee entity; and, paying said check guarantee entity by a financial institution.
 4. The future financing method of claim 3 wherein said paying said check guarantee entity comprises paying said check guarantee entity with an amount minus a financial institution service charge.
 5. The future financing method of claim 1 wherein receiving payment further comprises paying a financial institution a financial institution service charge and paying said check guarantee entity a check guarantee service charge.
 6. The future financing method of claim 1 wherein said two or more payment vouchers comprises ACH, checks, credit cards or debit cards.
 7. The future financing method of claim 1 wherein said check guarantee entity is a financial institution or combination of said check guarantee and said financial institution.
 8. A future financing method comprising: receiving two or more payment vouchers at a point of sale by a merchant for goods or services by a presenter of said two or more payment vouchers before delivering said goods or services wherein said two or more payment vouchers comprise a first payment voucher to be processed on a first date and a second payment voucher to be processed on a second date, wherein said second date is after said first date and wherein said presenter has traditional credit history that is insufficient to qualify for an equivalent cash instrument or credit vehicle wherein said traditional credit history comprises a credit report and wherein said two or more payment vouchers are not backed by sufficient funds to purchase said goods or said services outright at time of said accepting said two or more payment vouchers; accessing a payment voucher history database coupled with a computer; accessing from said computer a positive payment voucher writing history from said payment voucher history database wherein said positive payment voucher writing history comprises one or more positive characteristics associated with said presenter chosen from a high cash value of payment vouchers written by said presenter, an age of an account associated with said presenter, an age said presenter, a ZIP code of a location where said receiving said two or more payment vouchers at said point of sale from said presenter occurs; verifying the positive payment voucher writing history associated with said presenter; obtaining an average monthly balance of an account associated with said two or more payment vouchers; calculating a number of payment vouchers to accept for payment based on a purchase price for said goods and services and said average monthly balance of said account; accepting said two or more payment vouchers from said presenter on said verifying said positive payment voucher history without relying on said credit report; selling said two or more payment vouchers by said merchant to a check guarantee entity; and, receiving full payment minus a service charge before said second date for said goods or services from said check guarantee entity by said merchant upon said selling of said two or more payment vouchers to said check guarantee entity wherein said check guarantee entity receives payment from said two or more payment vouchers at said first date and said second date that occurs after said first date. 